TOKYO: Japanese government bond yields rose on Monday, with the yield on the benchmark 10-year note touching a more than six-year high, after robust US jobs data strengthened the case for accelerated Federal Reserve policy tightening.
The 10-year JGB yield retreated later to end flat at 0.195%, after earlier touching 0.205% for the first time since Jan. 29, 2016, when the Bank of Japan (BoJ) implemented its negative interest rate policy.
The five-year yield held above zero at 0.005%, also a six-year high.
Japan’s 5-year bond yield scales zero
There has been speculation in the market that the BoJ, pressured by tightening at the Fed, Bank of England and other global peers may be forced to accelerate its own exit from extraordinary stimulus, even as Governor Haruhiko Kuroda reiterated the need for continued support for Japan's economic recovery.
Some anticipate a first step might be shifting the zero percent yield target from the 10- to the five-year note. Currently, the central bank allows the 10-year yield to move 25 basis points either side of zero.
"There was talk the BoJ was preparing a market operation to reign in the yield, and so the market has shifted from a phase where it simply followed US yields to one where the BoJ's influence is the more important factor," said Katsutoshi Inadome, fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities.
Benchmark 10-year JGB futures fell 0.02 point to 150.32, with a trading volume of 23,729 lots.
The two-year JGB yield rose 0.5 basis point to minus 0.045%.
Moves were larger at the longer end, steepening the yield curve.
The 20-year yield rose 1.5 basis points to 0.615% and earlier reached 0.620%, while the 30-year yield rose 2.5 basis points to 0.825% and touched 0.830%, both firsts since November 2018.
The 40-year JGB yield rose 3 basis points to a new four-year high of 0.875%.
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